In yesterday’s ‘rate update’ video I reported that foreign participation in the US Treasury auctions were relatively light through Wednesday.  This is a bad sign for mortgage rates because if foreign investors don’t buy our bonds the US is forced to raise the yields on the notes to attract buyers.

In yesterday’s auction of 7-year notes foreign buyers showed up easing concerns in the marketplace.  As a result mortgage-backed bond prices rallied and recovered the losses incurred over the past 24 hours.

The Commerce Department reported better than expected GDP numbers this morning for the 2nd-quarter.  Good economic news is often bad for mortgage rates but a closer look into the GDP report shows troubling signs.  Consumer spending retracted in the 2nd-quarter after growing in the 1st and 1st-quarter GDP was revised lower.

For now we’re going to shift into a neutral position.

Current Outlook: neutral